The OGA has published its guidance on the handling of Enquiries carried out pursuant to the Energy Act 2016 (the “2016 Act”). The guidance sets out the process the OGA will “normally” adopt when carrying out an Enquiry – though the guidance is to be applied “flexibly” and the regulator may adopt a different approach, should the facts of a particular matter justify it. In determining the outcome of an Enquiry, the OGA intends to adopt principles of fairness, proportionality, and transparency (subject to considerations of commercial confidentiality). The full guidance can be found here.
Enquiries in the context of the OGA’s work
The OGA’s Operations Directorate carries out tiered stewardship reviews as part of its “business as usual” operations. Any issues that arise requiring attention from the OGA are normally dealt with through this process. Where an issue has not been resolved by stewardship and may have a MER UK impact, active facilitation may be required. This marks the start of the OGA’s “measured escalation” process. The level of facilitation may be increased to enhanced facilitation if the OGA considers that failure to progress the issue may have an adverse impact on MER UK. Stewardship, facilitation and enhanced facilitation are all dealt with by the OGA’s Operations Directorate. The OGA expects that most issues will be resolved at this stage and within this Directorate. If, however, an issue is not resolved through one of these processes, it is likely to be reclassified as a case for further examination by the disputes and sanctions team.
It is at this point that an Enquiry may be opened. The Enquiry process is intended to enable to OGA to assess the most appropriate course of action, taking into account the full range of regulatory powers available. The primary intention of the Enquiry process is to assess the most appropriate form of regulatory intervention. It is important to note that Enquiries will not automatically result in the application of any formal procedure. On the converse, however, it should be borne in mind that the OGA may proceed directly to an Investigation without first carrying out an Enquiry.
If a dispute has been referred to the OGA under s.82 of the Energy Act 2011 or s.20 of the 2016 Act, reference should be made to the OGA’s “Guidance on Disputes over Third Party Access to Upstream Oil and Gas Infrastructure” (available here) or its Dispute Resolution Guidance (available here), respectively. For all other disputes, the Enquiry Guidance should be referred to for guidance on the Enquiry phase of a case.
Enquiries and the OGA’s use of formal powers
The OGA defines four broad stages for any issue that has been classified as a case. These stages are:
- Draft decision / recommendation
- Final decision / recommendation
Enquiry process: initiation
Where the OGA considers that a matter has not been resolved by facilitation (stewardship or enhanced), then it is likely to progress the matter to the Regulation Directorate and reclassify the issue as a case, the first stage of which will generally be an Enquiry. If an Enquiry is commenced a case officer will be appointed and the relevant party or parties will be notified that an Enquiry has been opened. The case officer will assess the evidence and background information and consider next steps.
Enquiry process: requests for additional material:
The case officer may decide to gather additional material to enhance the OGA’s understanding of the issues, including further information from the party or parties involved or from relevant third parties. Requests for information will be accompanied with a deadline which will be set depending on the nature and amount of information requested. Where information is sought from third parties, the OGA will have regard to the confidentiality of the matter and will consult with the parties to the Enquiry before revealing any information to the third party. The OGA does not intend that requests for additional material will require recourse to the OGA’s formal information gathering powers and expects that parties will co-operate positively.
Enquiry process: prioritisation
Once it is in receipt of all the relevant information, the OGA will determine the preferred course of action. The OGA will aim to do this within six weeks of opening the Enquiry.However, it notes that this may take longer for novel or complex matters. In determining the best course of action, the OGA will have regard to:
- the potential impact on MER UK;
- the strategic significance;
- the time and cost of implementation; and
- the likelihood of success.
The OGA will be required to make reference to all relevant pieces of legislation and determine whether it has discretion on whether or not to act and if there is an urgency to act. For a sanctions case, the OGA will examine whether there is sufficient evidence that there has been a failure to comply with a petroleum-related requirement and whether there is merit in carrying out a full investigation.
Enquiry process: possible outcomes
The end result of an Enquiry will be one of the following:
- Dispute resolution
- Sanctions investigation
- Commitments in lieu of further action
- Compliance plans
- Area plans
- No further action
- Other course of action
Transparency and Publication
The OGA does not intend to publicise the launch of an Enquiry. However, it may publish the outcome of an Enquiry. Any publication may include a summary of the nature of the Enquiry, the OGA’s Enquiry conclusions, and any action that the OGA has decided should be undertaken. If the outcome of the Enquiry is for the OGA to launch an Investigation, the OGA will publish brief details of the existence of that Investigation. Unless it is in the public interest to do so, the OGA will not generally name the parties or third-parties who are the subject of an Investigation: this will undoubtedly have an impact on the details the OGA can publish on the existence of such an Investigation.
The publication of the Enquiry Guidance may prove useful to those parties who find themselves subject to an Enquiry as it will provide such parties with an indication of the process that they can expect the OGA to follow. However, there are limits on the comfort offered by such an expectation: the OGA has made clear it will apply the Guidance flexibly.
The minutes of the meeting of the OGA Board in February this year noted support from the Board for a shift towards greater transparency. The OGA considers that greater transparency of the investigations and disputes that it pursues will support MER UK. While the OGA intends to publish the outcome of an Enquiry and the launch of any resultant Investigations, the general principal of not naming the parties unless it is in the public interest to do so will, by default, limit the details that can be published and perhaps also the impact of the measures taken against the parties involved as this will limit “naming and shaming”. This all suggests that a balance is still being struck by the OGA between transparency and the need to preserve the confidentiality of sensitive commercial matters and thus the confidence of the industry in its regulator.